Process & Operation Costing By: CA PRAKASH PATEL

Chapter. 9: Process & Operation Costing

(I) Questions without application of valuation norms
A. QUESTION FROM STUDY MATERIAL
Question-1 (Study Material - illustration-1)
From the following data, PREPARE process accounts indicating the cost of each
process and the total cost. The total units that pass through each process were 240 for
the period.
Process I (₹) Process II (₹) Process III (₹)
Materials 1,50,000 50,000 20,000
Labour 80,000 2,00,000 60,000
Other expenses 26,000 72,000 25,000

Indirect expenses amounting to ₹ 85,000 may be apportioned on the basis of wages.

There was no opening or closing stock.
Hints:
Transfer from Units ₹
P-I 1,150 2,76,000
P-II 2,700 6,48,000
P-III 3,200 7,68,000

Question-2 (Study Material – illustration-2)

A product passes through three processes. The output of each process is treated as the raw
material of the next process to which it is transferred and output of the third process is
transferred to finished stock.

Process-I (₹) Process-II (₹) Process-III (₹)

Materials issued 40,000 20,000 10,000
Labour 6,000 4,000 1,000
Manufacturing overhead 10,000 10,000 15,000
10,000 units have been issued to the Process-I and after processing, the output of each
process is as under:
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Process Output Normal Loss

Process-I 9,750 units 2%
Process-II 9,400 units 5%
Process-III 8,000 units 10%
No stock of materials or of work-in-process was left at the end. CALCULATE the cost of
the finished articles.
Hints:
Transfer from Units ₹
P-I 9,750 55,714
P-II 9,400 91,051
P-III 8,000 1,10,687

Question-3 (Study Material – illustration-3)

RST Limited processes Product Z through two distinct processes – Process- I and Process-
II. On completion, it is transferred to finished stock. From the following information for
the year 20X8-X9, PREPARE Process- I, Process- II and Finished Stock A/c:
Particulars Process- I Process- II
Raw materials used 7,500 units --
Raw materials cost per unit ₹ 60 --
Transfer to next process/finished 7,050 units 6,525 units
stock
Normal loss (on inputs) 5% 10%
Direct wages ₹ 1,35,750 ₹ 1,29,250
Direct Expenses 60% of Direct wages 65% of Direct wages
Manufacturing overheads 20% of Direct wages 15% of Direct wages
Realisable value of scrap per unit ₹ 12.50 ₹ 37.50
6,000 units of finished goods were sold at a profit of 15% on cost. Assume that there
was no opening or closing stock of work-in-process.
Hints:
Transfer from Units ₹
P-I 7,050 6,82,403
P-II 6,525 9,13,824
Finished Stock 6,000 8,40,298
Net Profit = ₹1,38,182
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TEST YOUR KNOWLEDGE

Question-1 (Study Material Q-3)
A company produces a component, which passes through two processes. During the month
of April, 20X9, materials for 40,000 components were put into Process I of which 30,000
were completed and transferred to Process II. Those not transferred to Process II were
100% complete as to materials cost and 50% complete as to labour and overheads cost.
The Process I costs incurred were as follows:
Direct material ₹15,000
Direct wages ₹18,000
Factory overheads ₹12,000
Of those transferred to Process II, 28,000 units were completed and transferred to finished
goods stores. There was a normal loss with no salvage value of 200 units in Process II.
There were 1,800 units, remained unfinished in the process with 100% complete as to
materials and 25% complete as regard to wages and overheads.
No further process material costs occur after introduction at the first process until the end
of the second process, when protective packing is applied to the completed components.
The process and packing costs incurred at the end of the Process II were :
Packing materials ₹4,000
Direct wages ₹3,500
Factory overheads ₹4,500
Required:
1. PREPARE Statement of Equivalent Production, Cost per unit and Process I A/c.
2. PREPARE Statement of Equivalent Production, Cost per unit and Process II A/c.
Hints:
Process Value of closing WIP Cost/unit
P-I ₹8,035 0.375 + 0.514 + 0.343 = 1.232
P-II ₹2,358 1.240 + 0.123 + 0.158 = 1.521

B. PAST YEAR EXAM QUESTIONS

Nov-19. Q4(b) (10 marks)
A product passes through two distinct processes before completion.
Following information are available in this respect:
Process-I Process-II
Raw material used 10000 units -
Raw material cost (per unit) ₹75 -
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Transfer to next process/Finished goods 9000 units 8200 units

Normal loss (on inputs) 5% 10%
Direct wages ₹3,00,000 ₹5,60,000
Direct Expenses 50% of direct wages 65% of direct wages
Manufacturing overheads 25% of direct wages 15% of direct wages
Realizable value of scrap (per unit) ₹13.50 ₹145
8000 units of finished goods were sold at a profit of 15% on cost. There was no opening
and closing stock of work-in-progess.
Prepare:
1. Process-I and Process-II Account
2. Finished goods account
3. Normal loss account
4. Abnormal loss account
5. Abnormal gain account.
Solution:

May-18. Q3(b) (10 marks)

Alpha Ltd. is engaged in the production of a product A which passes through 3 different
process - Process P, Process Q and Process R. The following data relating to cost and
output is obtained from the books of accounts for the month of April 2017:

Particulars Process P Process Q Process R

Direct Material 38,000 42,500 42,880
Direct Labour 30,000 40,000 50,000
Production overheads of ₹ 90,000 were recovered as percentage of direct labour.
10,000 kg of raw material @ ₹ 5 per kg. was issued to Process P. There was no stock of
materials or work in process. The entire output of each process passes directly to the
next process and finally to warehouse. There is normal wastage, in processing, of 10 %.
The scrap value of wastage is ₹ 1 per kg. The output of each process transferred to next
process and finally to warehouse are as under:
Process P = 9,000 kg
Process Q = 8,200 kg
Process R = 7,300 kg

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The company fixes selling price of the end product in such a way so as to yield a profit
of 25% selling price.
Prepare Process P, Q and R accounts. Also calculate selling price per unit of end
product.
Solution:
Process- P Account
Kg. Amount Particulars Kg. Amount (₹)
Particulars (₹)
To Input 10,000 50,000 By Normal wastage 1,000 1,000
(1,000 kg. × ₹ 1)
To Direct Material --- 38,000 By Process- Q (9,000 9,000 1,39,500
kg. × ₹ 15.50)
To Direct Labour --- 30,000
To Production OH --- 22,500
(₹ 90,000 × 3/12)
10,000 1,40,500 10,000 1,40,500

Cost per unit = ₹1,40,500 - ₹1,000₹ = ₹15.50

10,000 kg – 1,000 kg
Process- Q Account
Kg. Amount (₹) Particulars Kg. Amount (₹)
Particulars
To Process-P A/c 9,000 1,39,500 By Normal wastage 900 900
(900 kg. × ₹ 1)
To Direct Material --- 42,500 By Process- Q 8,200 2,54,200
(8,200 kg. × ₹ 31)
To Direct Labour --- 40,000
To Production OH --- 30,000
(₹ 90,000 × 4/12)
To Abnormal Gain 100 3,100
(100 kg. × ₹ 31)
9,100 2,55,100 9,100 2,55,100
Cost per unit = ₹2,52,000 - ₹900 = ₹31
9,000 kg – 900 kg

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Process- R Account
Particulars Kg. Amount (₹) Particulars Kg. Amount (₹)

To Process-Q A/c 8,200 2,54,200 By Normal wastage 820 820

(820 kg. × Re.1)
To Direct Material --- 42,880 By Abnormal loss 80 4,160
(80 kg. × ₹ 52)
To Direct Labour --- 50,000 By Finished Goods 7,300 3,79,600
(7,300 kg. × ₹52)
To Production OH --- 37,500
(₹ 90,000 × 5/12)
8,200 3,84,580 8,200 3,84,580
Cost per unit = ₹3,84,580 - ₹820 = ₹52
8,200 kg – 820 kg
Calculation of Selling price per unit of end product:
Cost per unit ₹ 52.00
Add: Profit 25% on selling price i.e. 1/3rd of cost ₹ 17.33
Selling price per unit ₹ 69.33

C. ADDITIONAL QUESTIONS FOR PRACTICE (PAST YEAR EXAM QUESTIONS)

Question-1 (May 2012)
A product passes through two processes A and B. During the year 2013, the input to
process A of basic raw material was 8,000 units @ ₹ 9 per unit. Other information for
the year is as follows:
Process A Process B
Output units 7,500 4,800

Normal loss (% to input) 5% 10%

Scrap value per unit (₹ ) 2 10

Direct wages (₹ ) 12,000 24,000

Direct expenses (₹ ) 6,000 5,000

Selling price per unit (₹) 15 25

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Total overheads ₹ 17,400 were recovered as percentage of direct wages. Selling

expenses were ₹ 5,000. These are not allocated to the processes. 2/3rd of the output of
Process A was passed on to the next process and the balance was sold. The entire output
of Process B was sold.
Prepare Process A and B Accounts.
Solution:
Process- A Account
Particulars Units Amount Particulars Units Amount
(₹) (₹)
To Input 8,000 72,000 By Normal Loss 400 800
(5% of 8,000 units × ₹ 2)
To Direct Wages -- 12,000 By Abnormal loss 100 1,250
(100 units × ₹ 12.50)
To Direct Exp. -- 6,000 By Process- B A/c 5,000 62,500
(7,500 units× × ₹12.50)
2
3
To Overheads -- 5,800 2,500 31,250
1
By Profit and Loss A/c
(₹17,400 × ) (7,500 units× 1 × ₹12.50)
3 3
8,000 95,800 8,000 95,800

Cost per unit = ₹95,800 - ₹800 - ₹95,000 = ₹12.50

8,000units - 400units 7,600units
Process- B Account
Particulars Units Amount Particulars Units Amount
(₹) (₹)
To Process- A A/c 5,000 62,500 By Normal Loss 500 5,000
(10% of 5,000 units × ₹10)
To Direct Wages -- 24,000 By Finished Stock A/c or 4,800 1,04,640
Profit & loss A/c
(4,800 units × ₹ 21.80)
To Direct Expenses -- 5,000
To Overheads -- 11,600
(₹17,400 × 2)
3
To Abnormal gain 300 6,540

5,300 1,09,640 5,300 1,09,640

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Cost per unit = ₹1,03,100 - ₹5,000 - ₹98,100 =₹ 21.80

5,000units - 500units 4,500units
Working:
Profit & Loss A/c
Particulars Amount Amount Particulars Amount Amount
(₹) (₹) (₹) (₹)
To Cost of Sales: By Sales:
Process A 31,250 Process A
(2,500 units × ₹ 12.50) (2,500 units × ₹15) 37,500
Process B Process B
(4,800 units × ₹ 21.80) 1,04,640 1,35,890 (4,800 units × ₹ 25) 1,20,000 1,57,500
To Abnormal Loss: By Abnormal gain:
Process A 1,050 Process B [(300 units 3,540
[(100 units × ₹(12.50-2)] × ₹ (21.80-10)]

To Selling expenses 5,000

To Net Profit 19,100
1,61,040 1,61,040
Note:
1. As mentioned selling expenses are not allocable to process which is debited
directly to the P/L A/c.
2. It is assumed that Process A and Process B are not responsibility centres and
hence, Process A and Process B have not been credited to direct sales. P/L A/c
is prepared to arriving at profit/loss.

Question-2 (Nov-2015)
The following information is furnished by ABC Company for Process - II of its
manufacturing activity for the month of April 2015:
(i) Opening Work-in-Progress - Nil
(ii) Units transferred from Process I – 55,000 units at ₹ 3,27,800
(iii) Expenditure debited to Process – II:
Consumables ₹ 1,57,200
Labour ₹ 1,04,000
Overhead ₹ 52,000
(iv) Units transferred to Process III – 51,000 units
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(v) Closing WIP – 2,000 units (Degree of completion):

Consumables 80%
Labour 60%
Overhead 60%
(vi) Units scrapped - 2,000 units, scrapped units were sold at ₹ 5 per unit
(vii) Normal loss – 4% of units introduced
You are required to:
(i) Prepare a Statement of Equivalent Production.
(ii) Determine the cost per unit
(iii) Determine the value of Work-in-Process and units transferred to Process – III

Solution:
1. Statement of Equivalent Production
Equivalent Production
Input Units Output Units Material- A* Consumables Labour &
Overheads
Details Particulars % Units % Units % Units
Units 55,000 Units 51,000 100 51,000 100 51,000 100 51,000
transferre transferred to
d from Process- III
Process-I Normal loss
(4% of 2,200 - - - - - -
55,000)
Closing
W-I-P 2,000 100 2,000 80 1,600 60 1,200
Abnormal
Gain (200) 100 (200) 100 (200) 100 (200)
55,000 55,000 52,800 52,400 52,000

*Material A represent transferred-in units from process-I

2. Determination of Cost per Unit
Particulars Amount (₹) Units Per Unit (₹)
(i) Direct Material (Consumables) :
Value of units transferred from Process-I 3,27,800

Less: Value of normal loss (2,200 units × ₹ 5) (11,000)

3,16,800 52,800 6.00
1,57,200 52,400 3.00
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(ii) Consumables added in Process-II 1,04,000 52,000 2.00

(iii) Labour 52,000 52,000 1.00
(iii) Overhead
Total Cost per equivalent unit 12.00

3. Determination of value of Work-in-Process and units transferred to Process-III

Particulars Units Rate (₹) Amount (₹)
Value of Closing W-I-P:
Material from Process-I 2,000 6.00 12,000
Consumables 1,600 3.00 4,800
1,200 2.00 2,400
Labour Overhead
1,200 1.00 1,200
20,400
51,000 12.00
Value of units transferred to Process-III 6,12,000

Question-3 (May 2014)

M J Pvt. Ltd. produces a product "SKY" which passes through two processes, viz.
Process-A and Process-B. The details for the year ending 31st March, 2014 are as
follows:
Process A Process - B
40,000 Units introduced at a cost ₹ 3,60,000 -
of Material Consumed ₹ 2,42,000 2,25,000
Direct Wages ₹ 2,58,000 1,90,000
Manufacturing Expenses ₹ 1,96,000 1,23,720
Output in Units 37,000 27,000
5% 10%
Normal Wastage of Input
₹ 15 20
Scrap Value (per unit)
₹ 37 61
Selling Price (per unit)
Additional Information:
(a) 80% of the output of Process-A, was passed on to the next process and the
balance was sold. The entire output of Process- B was sold.
(b) Indirect expenses for the year was ₹ 4,48,080.
(c) It is assumed that Process-A and Process-B are not responsibility centre.
Required:
(i) Prepare Process-A and Process-B Account.

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(ii) Prepare Profit & Loss Account showing the net profit I net loss for the year.

Solution:
1. Process- A Account
Particulars Units Amount Particulars Units Amount
(₹) (₹)
To Input 40,000 3,60,000 By Normal wastage 2,000 30,000
(2,000 units × ₹ 15)

To Material --- 2,42,000 By Abnormal loss 1,000 27,000

A/c
(1,000 units × ₹ 27)

To Direct wages --- 2,58,000 By Process- B 29,600 7,99,200

(29,600 units × ₹ 27)

To Manufacturing Exp. --- 1,96,000 By Profit & Loss A/c 7,400 1,99,800
(7,400 units × ₹ 27)

40,000 10,56,000 40,000 10,56,000

Cost per unit = ₹10,56,000 - ₹30,000 = ₹27 per unit

40,000units - 2,000units
Normal wastage = 40,000 units × 5% = 2,000 units
Abnormal loss = 40,000 units – (37,000 units + 2,000 units) = 1,000 units
Transfer to Process- B = 37,000 units × 80% = 29,600 units
Sale = 37,000 units × 20% = 7,400 units
Process – B Account
Particulars Units Amount Particulars Units Amount
(₹) (₹)
To Process- A A/c 29,600 7,99,200 By Normal wastage 2,960 59,200
(2,960 units × ₹ 20)
To Material --- 2,25,000 27,000 12,96,000
By Profit & Loss
A/c
--- 1,90,000
To Direct Wages (27,000 units × ₹ 48)
--- 1,23,720
To Manufacturing Exp.

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To Abnormal Gain A/c 360 17,280

(360 units × ₹ 48)
29,960 13,55,200 29,960 13,55,200

Cost per unit = ₹13,37,920 - ₹59,200 = ₹48 per unit

29,600units - 2,960units
Normal wastage = 29,600 units × 10% = 2,960 units
Abnormal gain = (27,000 units + 2,960 units) – 29,600 units = 360 units

2. Profit & Loss Account

Particulars Amount Particulars Amount
(₹) (₹)
To Process- A A/c 1,99,800 By Sales:
- Process-A
To Process- B A/c 12,96,000 (7,400 units × ₹ 37) 2,73,800
- Process- B
To Abnormal loss A/c 12,000 (27,000 units × ₹ 61) 16,47,000
By Abnormal gain 10,800
To Indirect Expenses 4,48,080 By Net loss 25,000

19,55,880 19,55,880
Working Notes:
Normal wastage (Loss) Account
Particulars Units Amount Particulars Units Amount (₹)
(₹)
To Process- A A/c 2,000 30,000 By Abnormal Gain A/c 360 7,200
(360 units × ₹ 20)
To Process- B A/c 2,960 59,200 By Bank (Sales) 4,600 82,000
4,960 89,200 4,960 89,200
Abnormal Loss Account
Particulars Units Amount Particulars Units Amount
(₹) (₹)
To Process- A A/c 1,000 27,000 By Bank A/c 1,000 15,000
(1,000 units × ₹ 15)
By Profit & Loss A/c --- 12,000

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1,000 27,000 1,000 27,000

Abnormal Gain Account

Particulars Units Amount Particulars Units Amount
(₹) (₹)
To Normal loss A/c 360 7,200 By Process- B A/c 360 17,280
(360 units × ₹ 20)
To Profit & Loss A/c 10,080
360 17,280 360 17,280

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(II) Questions based on FIFO Method

A. QUESTION FROM STUDY MATERIAL
Question-4 (Study Material – illustration-4) (Also solved by Wgt. Avg. method as Q-5)
Opening work-in-process 1,000 units (60% complete); Cost ₹ 1,10,000. Units introduced
during the period 10,000 units; Cost ₹ 19,30,000. Transferred to next process - 9,000
units.
Closing work-in-process - 800 units (75% complete). Normal loss is estimated at 10% of
total input including units in process at the beginning. Scraps realise ₹ 10 per unit. Scraps
are 100% complete.
Using FIFO method, COMPUTE equivalent production and cost per equivalent unit.
Also evaluate the output.
Hints: Cost/unit = ₹210.88, Normal Loss = 1,100 units, Abnormal loss = 100 units
Question-5 (Study Material – illustration-5)
Refer to information provided in Illustration 4 above and solve this by Weighted Average
Method:
Hints: Cost/unit = ₹209.18, Normal Loss = 1,100 units, Abnormal loss = 100 units

B. PAST YEAR EXAM QUESTIONS

Nov-18. Q1 (c) (5 marks)
Following details have been provided by M/s AR Enterprises:
(i) Opening works-in-progress - 3000 units (70% complete)
(ii) Units introduced during the year - 17000 units
(iii) Cost of the process (for the period) - ₹ 33,12,720
(iv) Transferred to next process - 15000 units
(v) Closing works-in-progress - 2200 units (80% complete)
(vi) Normal loss is estimated at 12% of total input (including units in process in the
beginning). Scraps realise ₹ 50 per unit. Scraps are 100% complete.

Using FIFO method, compute:

(i) Equivalent production
(ii) Cost per equivalent unit

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Solution:
Statement of Equivalent Production Units (Under FIFO Method)

Particulars Input Particulars Output Equivalent

units units Production
(%) Equivalent
units
Opening W-I-P 3,000 From opening W-I-P 3,000 30 900
Units introduced 17,000 From fresh inputs 12,000 100 12,000
Units completed 15,000
(Transferred to next
process)
Normal Loss 2,400 -- --
{12% (3,000 + 17,000
units)}
Closing W-I-P 2,200 80 1760
Abnormal loss 400 100 400
(Balancing figure)
20,000 11,000 15,060

Computation of cost per equivalent production unit :

Cost of the Process (for the period) ₹ 33,12,720

Less: Scrap value of normal loss (₹ 50 × 2,400 units) (₹ 1,20,000)
Total process cost ₹ 31,92,720

C. ADDITIONAL QUESTIONS FOR PRACTICE (PAST YEAR EXAM QUESTIONS)

Question-1
From the following Information for the month ending October, 2013, prepare Process
Cost accounts for Process III. Use First-in-fist-out (FIFO) method to value equivalent

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production.
Direct materials added in Process III (Opening WIP) 2,000 units at ₹ 25,750
Transfer from Process II 53,000 units at ₹ 4,11,500
Transferred to Process IV 48,000 units
Closing stock of Process III 5,000 units
Units scrapped 2,000 units
Direct material added in Process III ₹
Direct wages 1,97,600
Production Overheads ₹ 97,600
₹ 48,800
Degree of completion:
Opening Closing Scrap
Stock Stock
Materials 80% 70% 100%

Labour 60% 50% 70%

Overheads 60% 50% 70%

The normal loss in the process was 5% of production and scrap was sold at ₹ 3 per unit.
Solution:
Process III
Process Cost Sheet (FIFO Method)
Opening Stock: 2,000 units; Introduced: 53,000 units
Statement of Equivalent Production
Input Output Equivalent production
Item Units Item Units Mat- A (%) Mat- B (%) Labou (%)
r&
OHs.
Opening 2,000 Work on 2,000 - - 400 20 800 40
stock opening WIP
Process II Introduced &
transfer 53,000 completed
during
the period
(48,000 – 2000) 46,000 46,000 100 46,000 100 46,000 100

48,000
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Normal Loss
(2,000+53,000 –
5,000) x 5% 2,500 - - - - - -

Closing WIP 5,000 5,000 100 3,500 70 2,500 50

55,500 51,000 49,900 49,300

Abnormal Gain 500 500 100 500 100 500 100

55,000 55,000 50,500 49,400 48,800

Statement of Cost for each Element

Element of cost Cost (₹) Equivalent Cost per
Production unit (₹)
Material A:
Transfer from Process-II 4,11,500
7,500
Less: Scrap value of Normal Loss (2,500 × ₹ 3)
4,04,000
1,97,600 50,500 8
Material B Wages 97,600 49,400 4
Overheads 48,800 48,800 2
48,800 1
7,48,000 15

Process Cost Sheet

( ₹)
Opening WIP (for completion):
Material- B (400 units × ₹ 4) 1,600
Wages (800 units × ₹ 2) 1,600
Overheads (800 units × ₹ 1) 800
4,000
Introduced and completely processed during the period (46,000 units × ₹ 15)
6,90,000
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Closing WIP:
Material- A (5,000 units × ₹ 8) 40,000
Material- B (3,500 units × ₹ 4) 14,000
Wages (2,500 units × ₹ 2) 5,000
Overheads (2,500 units × ₹ 1) 2,500
61,500
7,500
Abnormal Gain (500 units × ₹ 15)

Process III A/c

Particulars Units Amount Particulars Units Amount
To Balance b/d 2,000 25,750 By Normal Loss 2,500 7,500

To Process II A/c 53,000 4,11,500 By Process IV A/c

(₹6,90,000 + ₹ 4000 + ₹
25,750) 48,000 7,19,750

To Direct Material 1,97,600 By Balance c/d 5,000 61,500

To Direct Wages 97,600

To Production OH 48,800

To Abnormal Gain 500 7,500

55,500 7,88,750 55,500 7,88,750

Question-2
Following information is available regarding Process A for the month of October 2013:
Production Record:
(i) Opening work-in progress 40,000 Units
(Material: 100% complete, 25% complete for labour & overheads)
(ii) Units Introduced 1,80,000 Units
(iii) Units Completed 1,50,000 Units
(iv) Units in-process on 31.10.2013 70,000 Units
(Material: 100% complete, 50% complete for labour & overheads)

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Cost Record: (₹)

Opening Work-in-progress:
Material 1,00,000
Labour 25,000
Overheads 45,000
Cost incurred during the month:
Material 6,60,000
Labour 5,55,000
Overheads 9,25,000
Assure that FIFO method is used for W.I.P. inventory valuation.
Required:
(i) Statement of Equivalent Production
(ii) Statement showing Cost for each element
(iii) Statement of apportionment of Cost
(iv) Process- A Account
Solution:
Statement of Equivalent Production
(FIFO Method)
Input Output Equivalent Production
Particulars Units Particulars Units Material Labour &
Overheads
(%) Units (%) Units
Opening 40,000 Transfer to Process II:
WIP 1,80,000 Opening WIP 40,000 -- -- 75 30,000
1,10,000 100 1,10,000 100 1,10,000
Introduced completed Introduced &
70,000 100 70,000 50 35,000
completed Closing WIP
2,20,000 2,20,000 1,80,000 1,75,000

Statement showing Cost for each element

Item of Cost Equivalent Cost Incurred (₹) Cost per Unit (₹)
Production
Material 1,80,000 6,60,000 3.66667
Labour & Overheads 1,75,000 14,80,000 8.45714

12.12381

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Statement of Apportionment of Cost

Transfer to Process II
Opening WIP Completed
Cost already Incurred ₹ (1,00,000 + 25,000 + 45,000) 1,70,000
Cost Incurred during the Month
Labour & Overheads (30,000 units × ₹8.45714) 2,53,714 4,23,714
Introduced & Completed (1,10,000 units × ₹ 12.12381) 13,33,619
17,57,333
Closing WIP
Material (70,000 units × ₹ 3.66667) 2,56,667
Labour and Overheads (35,000 units × ₹ 8.45714) 2,96,000 5,52,667

Process- A A/c
Particulars Units Amount (₹) Particulars Units Amount (₹)
To Opening WIP 40,000 1,70,000 By Process II A/c 1,50,000 17,57,333

To Materials 1,80,000 6,60,000 By Closing WIP 7,000 5,52,667

To Labour 5,55,000

To Overheads 9,25,000
2,20,000 23,10,000 2,20,000 23,10,000

Question-3
Star Ltd. manufactures chemical solutions for the food processing industry. The
manufacturing takes place in a number of processes and the company uses a FIFO process
costing system to value work-in-process and finished goods. At the end of the last month,
a fire occurred in the factory and destroyed some of the paper files containing records of
the process operations for the month.
Star Ltd. needs your help to prepare the process accounts for the month during which the
fire occurred. You have been able to gather some information about the month’s operating
activities but some of the information could not be retrieved due to the damage. The
following information was salvaged:
 Opening work-in-process at the beginning of the month was 800 litres, 70% complete for
labour and 60% complete for overheads. Opening work-in-process was valued at ₹
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Process & Operation Costing By: CA PRAKASH PATEL

26,640.
 Closing work-in-process at the end of the month was 160 litres, 30% complete for labour
and 20% complete for overheads.
 Normal loss is 10% of input and total losses during the month were 1,800 litres partly due
to the fire damage.
 Output sent to finished goods warehouse was 4,200 litres.
 Losses have a scrap value of ₹15 per litre.
 All raw materials are added at the commencement of the process.
 The cost per equivalent unit (litre) is ₹39 for the month made up as follows:
(₹)
Raw Material 23
Labour 7
Overheads
9
39
Required:
A. Calculate the quantity (in litres) of raw material inputs during the month.
B. Calculate the quantity (in litres) of normal loss expected from the process and the quantity
(in litres) of abnormal loss / gain experienced in the month.
C. Calculate the values of raw material, labour and overheads added to the process during the
month.
D. Prepare the process account for the month.
Solution:
A. Calculation of Raw Material inputs during the month:
Quantities Entering Process Litres Quantities Leaving Process Litres
Opening WIP 800 Transfer to Finished Goods 4,200
Raw material input (balancing 5,360 Process Losses 1,800
figure) Closing WIP 160
6,160 6,160

B. Calculation of Normal Loss and Abnormal Loss/Gain

Litres
Total process losses for month 1,800
Normal Loss (10% input) 536
Abnormal Loss (balancing figure) 1,264
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C. Calculation of values of Raw Material, Labour and Overheads added to the process:
Material Labour Overheads
Cost per equivalent unit ₹ 23.00 ₹7.00 ₹9.00
Equivalent units (litre) (refer the working note) 4,824 4,952 5,016
Cost of equivalent units ₹1,10,952 ₹34,664 ₹45,144
Add: Scrap value of normal loss (536 units × ₹ 15) ₹8,040 -- --
Total value added ₹1,18,992 ₹34,664 ₹45,144

Workings:
Statement of Equivalent Units (litre):
Equivalent Production
Input Details Units Output details Material Labour Overheads
Units
Units (%) Units (%) Units (%)
Opening WIP 800 Units completed:
Units
introduced 5,360 - Opening WIP 800 -- -- 240 30 320 40

- Fresh inputs 3,400 3,400 100 3,400 100 3,400 100

Normal loss 536 -- -- -- -- -- --
Abnormal loss 1,264 1,264 100 1,264 100 1,264 100
Closing WIP 160 160 100 48 30 32 20
6,160 6,160 4,824 4,952 5,016

D. Process Account for Month

Litres Amount (₹) Litres Amount
(₹)
To Opening WIP 800 26,640 By Finished goods 4,200 1,63,800

To Raw Materials 5,360 1,18,992 By Normal loss 536 8,040

To Wages -- 34,664 By Abnormal loss 1,264 49,296

To Overheads -- 45,144 By Closing WIP 160 4,304

6,160 2,25,440 6,160 2,25,440

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(III) Questions based on Weighted Average Method

A. QUESTION FROM STUDY MATERIAL

TEST YOUR KNOWLEDGE

Question-1 (Study Material Q-1)
Following information is available regarding Process-I for the month of February, 20X9 :
Production Record:
Units in process as on 1.2.20X9 4,000
(All materials used, 25% complete for labour and overhead)
New units introduced 16,000
Units completed 14,000
Units in process as on 28.2.20X9 6,000
(All materials used, 33-1/3% complete for labour and overhead)
Cost Records:
Work-in-process as on 1.2.20X9 (₹)
Materials 6,000
Labour 1,000
Overhead 1,000
8,000
Cost during the month
Materials 25,600
Labour 15,000
Overhead 15,000
55,600
Presuming that average method of inventory is used, PREPARE:
(i) Statement of equivalent production.
(ii) Statement showing cost for each element.
(iii) Statement of apportionment of cost.
(iv) Process cost account for Process-I.
Hints:
Particulars Material Labour & Overhead
Equivalent Production 20,000 16,000
Cost/unit 1.58 2
Closing WIP ₹13,480

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Question-2 (Study Material Q-2)

Following details are related to the work done in Process-I by XYZ Company during the
month of March, 20X9:
(₹)
Opening work-in process (2,000 units)
Materials 80,000
Labour 15,000
Overheads 45,000
Materials introduced in Process-I (38,000 units) 14,80,000
Direct Labour 3,59,000
Overheads 10,77,000
Units scrapped : 3,000 units
Degree of completion :
Materials 100%
Labour and overheads 80%
Closing work-in process : 2,000 units
Degree of completion :
Materials 100%
Labour and overheads 80%
Units finished and transferred to Process-II: 35,000 units
Normal Loss :
5% of total input including opening work-in-process.
Scrapped units fetch ₹20 per piece
You are required to prepare using weighted average method.
(i) Statement of equivalent production
(ii) Statement of cost
(iii) Statement of distribution cost, and
(iv) Process-I Account, Normal Loss Account and Abnormal Loss Account.
Hints:
Particulars Material Labour & Overhead
Equivalent Production 38,000 37,400
Cost/unit 40 40

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B. PAST YEAR EXAM QUESTIONS

Nov.-20 Q4 (a) (10 marks)
Following details are related to the work done in Process-I by ABC Ltd. during the month
of May 2019:
(₹)
Opening work in process (3,000 units)
Materials 1,80,500
Labour 32,400
Overheads 90,000
Materials introduced in Process-I (42,000 units) 36,04,000
Labour 4,50,000
Overheads 15,18,000

Units Scrapped : 4,800 Units

Degree of completion
Materials : 100%
Labour & overhead : 70%
Closing Work-in-process : 4,200 Units
Degree of completion
Materials : 100%
Labour & overhead : 50%

Units finished and transferred to Process-II: 36,000 units

Normal loss: 4% of total input including opening work-in-process
Scrapped units fetch ₹ 62.50 per piece.

Prepare:
(i) Statement of equivalent production.
(ii) Statement of cost per equivalent unit.
(iii) Process-I A/c
(iv) Normal Loss Account and
(v) Abnormal Loss Account

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Solution:
(i) Statement of Equivalent Production (Weighted Average method)
Particulars Input Particulars Output Equivalent Production
Units Units Material Labour &
O.H.
% Units % Units
Opening WIP 3,000 Completed and 36,000 100 36,000 100 36,000
transferred to
Process-II
Units introduced 42,000 Normal Loss 1,800 -- -- -- --
(4% of 45,000 units)
Abnormal loss 3,000 100 3,000 70 2,100
(Balancing figure)
Closing WIP 4,200 100 4,200 50 2,100
45,000 45,000 43,200 40,200

(ii) Statement showing cost for each element

Particulars Materials (₹) Labour (₹) Overhead (₹) Total (₹)
Cost of opening 1,80,500 32,400 90,000 3,02,900
work- in-process
Cost incurred during 36,04,000 4,50,000 15,18,000 55,72,000
the month
Less: Realisable Value (1,12,500) -- -- (1,12,500)
of normal scrap (₹
62.50 × 1,800
units)
Total cost: (A) 36,72,000 4,82,400 16,08,000 57,62,400

Equivalent units: (B) 43,200 40,200 40,200

Cost per equivalent 85.00 12.00 40.00 137.00

unit: (C) = (A ÷ B)

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Statement of Distribution of cost

Particulars Amount (₹) Amount (₹)

1. Value of units completed and 49,32,000
transferred:
2. Value of Abnormal Loss:
2,55,000
25,200
84,000 3,64,200
3. Value of Closing W-I-P:
3,57,000
25,200
84,000 4,66,200

(iii) Process-I A/c

Particulars Units (₹) Particulars Units (₹)
To Opening W.I.P:
 Materials 3,000 1,80,500 By Normal 1,800 1,12,500
 Labour -- 32,400 Loss
 Overheads -- 90,000
units)
To Materials 42,000 36,04,000 By Abnormal loss 3,000 3,64,200
introduced
To Labour 4,50,000 By Process-I A/c 36,000 49,32,000
To Overheads 15,18,000 By Closing WIP 4,200 4,66,200
45,000 58,74,900 45,000 58,74,900

(iv) Normal Loss A/c

Particulars Units (₹) Particulars Units (₹)
To Process-I 1,800 1,12,500 By Cost Ledger 1,800 1,12,500
A/c Control A/c
1,800 1,12,500 1,800 1,12,500

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(v) Abnormal Loss A/c

Particulars Units (₹) Particulars Units (₹)

To Process-I 3,000 3,64,200 By Cost Ledger 3,000 1,87,500
A/c Control A/c (₹ 62.5 ×
3,000
units)
By Costing Profit & 1,76,700
Loss A/c (Bal. Figure)
3,000 3,64,200 3,000 3,64,200

C. ADDITIONAL QUESTIONS FOR PRACTICE (PAST YEAR EXAM QUESTIONS)

Question-1
A Chemical Company carries on production operation in two processes. The material
first pass through Process I, where Product ‘A’ is produced.
Following data are given for the month just ended:
Material input quantity 2,00,000 kg
Opening work-in-progress quantity
(Material 100% and conversion 50% complete) 40,000 kg
Work completed quantity 1,60,000 kg
Closing work-in-progress quantity
(Material 100% and conversion two-third complete) 30,000 kg
Material input cost ₹75,000
Processing cost ₹1,02,000
Opening work-in-progress cost
Material cost ₹20,000
Processing cost ₹12,000
Normal process loss in quantity may be assumed to be 20% of material input. It has no
realisable value.
Any quantity of Product ‘A’ can be sold for ₹ 1.60 per kg.
Alternatively, it can be transferred to Process II for further processing and then sold as
Product ‘AX’ for ₹ 2 per kg. Further materials are added in Process II, which yield two kg.
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Process & Operation Costing By: CA PRAKASH PATEL

of product ‘AX’ for every kg. of Product ‘A’ of Process I.

Of the 1,60,000 kg. per month of work completed in Process I, 40,000 kg. are sold as
Product ‘A’ and 1,20,000 kg. are passed through Process II for sale as Product ‘AX’.
Process II has facilities to handle upto 1,60,000 kg. of Product ‘A’ per month, if required.
The monthly costs incurred in Process II (other than the cost of Product ‘A’) are:
1,20,000 kg. of Product ‘A’ 1,60,000 kg. of Product ‘A’
input input
(₹) (₹)
Materials Cost 1,32,000 1,76,000

Processing Costs 1,20,000 1,40,000

Required:
(i) Determine, using the weighted average cost method, the cost per kg. of Product
‘A’ in Process I and value of both work completed and closing work-in-progress
for the month just ended.
(ii) Is it worthwhile processing 1,20,000 kg. of Product ‘A’ further?
(iii) Calculate the minimum acceptable selling price per kg., if a potential buyer could
be found for additional output of Product ‘AX’ that could be produced with the
remaining Product ‘A’ quantity.
Solution:
(i) Process-I
Statement of Equivalent Production
Inputs Output Equivalent output
Material Conversion
Particulars Kg. Particulars Kg. (%) kg. (%) kg.
Opening W.I.P. 40,000 Normal loss 40,000 -- -- -- --
New material Units
introduced 2,00,000 introduced &
completed 1,60,000 100 1,60,000 100 1,60,000
Abnormal loss 10,000 100 10,000 100 10,000
Closing WIP 30,000 100 30,000 2/3rd 20,000
2,40,000 2,40,000 2,00,000 1,90,000

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Process- I
Statement of Cost for each element
Elements of cost Costs of Costs in Total cost Equivalent Cost per
opening WIP process units Kg.
(₹) (₹) (₹) Kg. (₹)
Material Conversion 20,000 75,000 95,000 2,00,000 0.475
cost 12,000 1,02,000 1,14,000 1,90,000 0.600
32,000 1,77,000 2,09,000 1.075

Statement of Apportionment of Cost

Units Elements Equivalent units Cost/unit Cost Total cost
completed (Kg.)
(₹) (₹) (₹)
Work completed Material 1,60,000 0.475 76,000
Conversion 1,60,000 0.600 96,000 1,72,000
Material 30,000 0.475 14,250
Closing WIP 26,250
Conversion 20,000 0.600 12,000

(ii) Statement showing comparative data to decide whether 1,20,000 kg. of product ‘A’
should be processed further into ‘AX’.
Alternative I – To sell product ‘A’ after Process – I (₹)
Sales 1,20,000 kg. x ₹ 1.60 1,92,000
Less: Cost from Process- I 1,20,000 kg. x ₹ 1.075 1,29,000
Profit 63,000

Alternative II – Process further into ‘AX’

Sales 2,40,000 kg. x ₹ 2.00 4,80,000
Less: Cost from Process- I 1,20,000 kg. x ₹ 1.075 = ₹ 1,29,000
Material in Process- II = ₹ 1,32,000
Processing cost in Process- II = ₹ 1,20,000 3,81,000
Profit 99,000
Hence company should process further
It will increase profit by ₹ 99,000 – ₹ 63,000 = ₹ 36,000

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(i) Calculation of minimum selling price per kg.:

Cost of processing remaining 40,000 kg. further (₹)
Material ₹ 1,76,000 - ₹ 1,32,000 44,000
Processing cost ₹ 1,40,000 – ₹ 1,20,000 20,000
Cost from process- I relating to 40,000 kg. ‘A’ (40,000 kg. × ₹1.075) 43,000
Benefit foregone if 40,000 kg. ‘A’ are further processed
40,000 kg. (₹ 1.60 – ₹ 1.075) 21,000
Total cost 1,28,000
Additional quantity of product ‘AX’ (40,000 kg. × ₹ 2) 80,000
 Minimum selling price = (₹1,28,000/80,000 kg) = ₹1.60

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(IV) Inter process profit

A. QUESTION FROM STUDY MATERIAL
Question-6 (Study Material – illustration-6)
A Ltd. produces product ‘AXE’ which passes through two processes before it is completed
and transferred to finished stock. The following data relate to October 20X8:
Process- I Process- Finished
(₹) II (₹) Stock (₹)
Opening stock 7,500 9,000 22,500
Direct materials 15,000 15,750 --
Direct wages 11,200 11,250 --
Factory overheads 10,500 4,500 --
Closing stock 3,700 4,500 11,250
Inter-process profit included in -- 1,500 8,250
opening stock
Output of Process- I is transferred to Process- II at 25% profit on the transfer price. Output
of Process- II is transferred to finished stock at 20% profit on the transfer price. Stock in
process is valued at prime cost. Finished stock is valued at the price at which it is received
from process II. Sales during the period are ₹ 1,40,000.
PREPARE Process cost accounts and finished goods account showing the profit element
at each stage.
Hints:
Transfer from Cost Profit Total
P-I ₹40,500 ₹13,500 ₹54,000
P-II ₹75,750 ₹36,750 ₹1,12,500
Finished Stock ₹84,425 ₹57,575 ₹1,40,000

B. PAST YEAR EXAM QUESTIONS

May-19. Q2 (b) (5 marks)
KT Ltd. produces a product EMM which passes through two processes before it is
completed and transferred to finished stock. The following data relate to May 2019:

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Particulars Process Finished stock

A B
(₹) (₹) (₹)
Opening Stock 5,000 5,500 10,000
Direct Materials 9,000 9,500
Direct Wages 5,000 6,000
Factory Overheads 4,600 2,030
Closing Stock 2,000 2,490 5,000
Inter-process profit included in opening stock 1,000 4,000
Output of Process A is transferred to Process B at 25% profit on the transfer price and
output of Process B is transferred to finished stock at 20% profit on the transfer price.
Stock in process is valued at prime cost. Finished stock is valued at the price at which
it is received from Process B. Sales during the period are ₹ 75,000.
Prepare the Process cost accounts and Finished stock account showing the profit element
at each stage.
Solution:
Process-A A/c
Particulars Total Cost Profit Particulars Total Cost Profit
(₹) (₹) (₹) (₹) (₹) (₹)
Opening stock 5,000 5,000 _ Process B 28,800 21,600 7,200
A/c
Direct materials 9,000 9,000 _
Direct wages 5,000 5,000 _
19,000 19,000 _
Less: Closing (2,000) (2,000) _
stock
Prime Cost 17,000 17,000 _
Overheads 4,600 4,600 _
Process Cost 21,600 21,600 _
Profit (33.33% of 7,200 - 7,200
total cost)
28,800 21,600 7,200 28,800 21,600 7,200

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Process-B A/c
Particulars Total Cost Profit Particulars Total Cost Profit
(₹) (₹) (₹) (₹) (₹) (₹)
Opening stock 5,500 4,500 1,000 Finished 61,675 41,550 20,125
stock A/c
Process A A/c 28,800 21,600 7,200
Direct materials 9,500 9,500 _
Direct wages 6,000 6,000 _
49,800 41,600 8,200
Less: Closing stock (2,490) (2,080) (410)
Prime Cost 47,310 39,520 7,790
Overheads 2,030 2,030 _
Process Cost 49,340 41,550 7,790
Profit (25% of total 12,335 - 12,335
cost)
61,675 41,550 20,125 61,675 41,550 20,125
Finished Stock A/c
Particulars Total Cost Profit Particulars Total Cost Profit
(₹) (₹) (₹) (₹) (₹) (₹)

Opening stock 10,000 6,000 4,000 Costing P&L 75,000 44,181 30,819
A/c
Process B A/c 61,675 41,550 20,125

71,675 47,550 24,125

Less: Closing stock (5,000) (3,369) (1,631)

COGS 66,675 44,181 22,494

Profit 8,325 - 8,325

75,000 44,181 30,819 75,000 44,181 30,819

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C. ADDITIONAL QUESTIONS FOR PRACTICE (PAST YEAR EXAM QUESTIONS)

Question-1 (May 2017)
A product passes through three processes ‘X’, ‘Y’ and ‘Z’. The output of process ‘X’ and
‘Y’ is transferred to next process at cost plus 20 per cent each on transfer price and the
output of process ‘Z’ is transferred to finished stock at a profit of 25 per cent on transfer
price. The following information are available in respect of the year ending 31st March,
2014:
Process-X Process-Y Process-Z Finished Stock
(₹) (₹) (₹) (₹)
Opening stock 15,000 27,000 40,000 45,000
Material Wages 80,000 65,000 50,000 --
Manufacturing Overheads 1,25,000 1,08,000 92,000 --
Closing stock 96,000 72,000 66,500 -- 50,000
Inter process profit included in 20,000 32,000 39,000
Opening stock NIL 4,000 10,000 20,000
Stock in processes is valued at prime cost. The finished stock is valued at the price at which
it is received from process ‘Z’. Sales of the finished stock during the period was ₹
14,00,000.
You are required to prepare:
(i) Process accounts and finished stock account showing profit element at each stage.
(ii) Costing Profit and Loss account.
(iii) Show the relevant items in the Balance Sheet.
Solution:
(i) Process ‘X’ Account
Cost Profit Total Particulars Cost Profit Total
Particulars (₹) (₹) (₹) (₹) (₹) (₹)
To Opening Stock 15,000 - 15,000 By Process ‘Y’ 2,96,000 74,000 3,70,000
A/c (Transfer)
To Material 80,000 - 80,000
To Wages 1,25,000 - 1,25,000
Total
2,20,000 - 2,20,000
Less: Closing stock 20,000 - 20,000
Prime Cost 2,00,000 2,00,000
To Manufacturing
96,000 - 96,000

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Process & Operation Costing By: CA PRAKASH PATEL

Overheads 2,96,000 2,96,000

Total cost 74,000
-
To Costing Profit and
Loss A/c (20% on 74,000
transfer Price or 25% 2,96,000 74,000 3,70,000 2,96,000 74,000 3,70,000
on cost)

Process ‘Y’ Account

Dr. Cr.
Cost Profit Total Cost Profit Total
Particulars (₹) (₹) (₹) Particulars (₹) (₹) (₹)
To Opening Stock 23,000 4,000 27,000 By Process ‘Z’ A/c 5,36,379 2,26,121 7,62,500
(Transfer)
To Process ‘X’ A/c 2,96,000 74,000 3,70,000
To Material 65,000 -- 65,000
To Wages
1,08,000 -- 1,08,000
Total 4,92,000 78,000 5,70,000
Less: Closing stock 27,621 4,379 32,000
Prime Cost 4,64,379 73,621 5,38,000
To Manufacturing
Overheads 72,000 -- 72,000
Total cost 5,36,379 73,621 6,10,000

To Costing Profit and -- 1,52,500 1,52,500

Loss A/c (20% on
transfer Price or 25%
on cost)
5,36,379 2,26,121 7,62,500 5,36,379 2,26,121 7,62,500

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Process ‘Z’ Account

Dr. Cr.
Cost Profit Total Cost Profit Total
Particulars (₹) (₹) (₹) Particulars (₹) (₹) (₹)
To Opening Stock 30,000 10,000 40,000 By Finished Stock 7,45,629 5,50,371 12,96,000
A/c (Transfer)

To Process ‘Y’ A/c 5,36,379 2,26,121 7,62,500

To Material 50,000 -- 50,000
To Wages 92,000 -- 92,000

Total 7,08,379 2,36,121 9,44,500

Less: Closing stock 29,250 9,750 39,000

Prime Cost 6,79,129 2,26,371 9,05,500

To Manufacturing
Overheads 66,500 -- 66,500

7,45,629 2,26,371 9,72,000

Total cost

To Costing Profit and -- 3,24,000 3,24,000

Loss A/c (25% on
transfer Price or 33
1/3% on cost)
7,45,629 5,50,371 12,96,000 7,45,629 5,50,371 12,96,000
Finished Stock Account
Dr. Cr.
Cost Profit Total Cost Profit Total
Particulars (₹) (₹) (₹) Particulars (₹) (₹) (₹)
To Opening Stock 25,000 20,000 45,000 By Costing P&L A/c 7,41,862 6,58,138 14,00,000
A/c (Transfer)

To Process ‘Z’ A/c 7,45,629 5,50,371 12,96,000

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Process & Operation Costing By: CA PRAKASH PATEL

Total 7,70,629 5,70,371 13,41,000

Less: Closing stock 28,767 21,233 50,000

To Costing Profit and 7,41,862 5,49,138 12,91,000

Loss A/c

1,09,000 1,09,000

7,41,862 6,58,138 14,00,000 7,41,862 6,58,138 14,00,000

Costing Profit & Loss Account

for the year ending 31st March, 2014
Dr. Cr.
Particulars Amount Particulars Amount
(₹) (₹)
To Provision for unrealized By Provision for unrealized profit
profit on closing stock on opening stock
(₹ 4,379 + ₹ 9,750 + ₹ 21,233) 35,362 (₹ 4,000 + ₹ 10,000 + ₹ 20,000) 34,000
To Net Profit 6,58,138 By Process X A/c By 74,000
Process Y A/c By 1,52,500
Process Z A/c 3,24,000
By Finished Stock A/c 1,09,000
6,93,500 6,93,500

Workings:
Calculation of amount of unrealized profit on closing stock:
Process ‘X’ = Nil
Process ‘Y’ = ₹78,000 x ₹32,000 = ₹4,379
₹5,70,000
Process ‘Z’ = ₹2,36,121 x ₹39,000 = ₹9,750
₹9,44,500
Finished Stock = ₹5,50,371 x ₹50,000 = ₹21,333
₹12,96,000

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Process & Operation Costing By: CA PRAKASH PATEL

Balance Sheet as on 31st March, 2014 (Extract)

Liabilities Amount Assets Amount
(₹) (₹)
Net profit 6,58,138 Closing stock:
Process – X 20,000
Process – Y 32,000
Process – Z 39,000
Finished stock 50,000
1,41,000
Less: Provision for unrealized profit 35,362
1,05,638

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